New Punch boss: Leased pubs are a creative cauldron

Roger Whiteside arrived at the helm of Punch Taverns' leased and tenanted division two weeks before the Business & Enterprise Committee's (Bec) inquiry put pubco bosses through their paces in early December.

His new boss Giles Thorley stepped in to handle the committee's robust questioning on this occasion (Pubcos: case for the defence​).

Whiteside was busy elsewhere getting to grips with the complex business of running the UK's largest tenanted pub estate. His baptism involved spending his first week in a Punch tenanted pub, the Fox & Hounds, in Coxbench, Derbyshire, getting a feel for the coalface.

Licensee Mel Whysall, who has been running the pub for two and a half years, says: "He is a very down-to-earth guy — very willing to listen to our point of view."

Since then, Whiteside has visited dozens more Punch tenanted pubs to talk to operators about the realities of life. "I've seen some amazing pubs," he says.

Whiteside has now completed his first 100 days at Punch, a period of fairly radical change. There's been the offer to 500 tenants to buy their pubs, an offer Whiteside extended in principle to the entire estate last week. "There's a window of opportunity for tenants with interest rates so low," he says (All 7,560 Punch licensees invited to buy pubs​).

I'm really excited by the pub industry and the leased model, which is a creative cauldron.​Roger Whiteside

A whole 1,000 struggling pubs have been lumped into a turnaround division where they are to undergo intensive efforts to revive their fortunes (1,000+ Punch pubs in new division​). There's internal restructuring on the jobs front too, although Whiteside insists the business relationship manager (BRM) structure and ratios are sacrosanct.

The overarching worry is that beer volumes are down almost 12% year on year. The drop is slightly misleading because it counts the several hundred Punch pubs that are closed. Nevertheless, these sorts of beer volume declines would spell disaster for Punch itself if they carried on at the same rate.

Smaller, higher-quality estate​

What does Whiteside make of it all? "I don't think pubs are going to disappear off the face of the earth. I'm really excited by the pub industry and the leased model, which is a creative cauldron.

"We're still letting a lot of pubs — more than this time last year. Admittedly, we have more pubs to let than this time last year. But we've got lots of pubs still growing their market share.

"We will end up with a smaller, higher-quality estate — although I'm not putting a number on it. The pubs that come through this recession will be better and stronger for it."

Punch's corporate focus for the time being is on paying down its £4.5bn debt mountain. (Hence the offer to all tenants to get in touch if they would seriously like to buy their pub).

For those pubs with a low turnover, if beer volumes carry on falling at 10% a year, those pubs are going to fall over unless they have some other vision for the future.​Roger Whiteside

At the micro level, the company is spending £1.6m a month on supporting its bottom-end pubs with rent and discount concessions. Its new 1,000-strong turnaround division is an implicit indication of the number of pubs that may not have a future within the Punch estate for reasons of economic viability.

But Whiteside insists the fortunes of many of these sites may be revivable. "We can find solutions that you don't find when a BRM's whole focus is not on them."

He goes one step further than you usually come across, though, by suggesting that Punch pubs taking less than £3,000 to £4,000 a week have a "questionable" future within the Punch estate. "For those pubs with a low turnover, if beer volumes carry on falling at 10% a year, those pubs are going to fall over unless they have some other vision for the future."

Two sides to every story​

Whiteside's background is very much in retailing, not something you always find with tenanted pubco bosses. He spent nearly two decades at Marks & Spencer, launched the Ocado food delivery service and ran Threshers for a while.

A journalist colleague who dealt with Whiteside extensively during his days at Threshers says the following about him: "He's an incredibly open guy — I liked interviewing him because he was always so honest about good and bad aspects of the company's performance.

"He was very well regarded prior to Thresher and is one of the few managing directors the company had who seemed able to win over staff and suppliers alike."

Whiteside seems determined to apply the principles of engagement and openness in his new role. He won credit for inviting dissident Punch tenants in to chat at Burton headquarters when they travelled up to protest. He admits that he reads the often sour comments from Punch licensees on the Morning Advertiser website forums to see what he can learn.

On complaints, he says: "We want to hear their case, but we want them to hear our case as well. There's always two sides to every story." Sometimes, he admits, things become so bad that "all we can do is go to the contract" — enforce Punch's rights as enshrined in the legal document that governs the fundamentals.

Price rises​

Another piece of good news from Whiteside is that Punch, like other pubcos, has decided to delay passing on the wholesale beer price in-creases from February to the end of March. They will also be restricting the overall increase to 4%, when

others are increasing by 6%. The move means that Punch is taking a middle path, absorbing around 2% of the increase.

What is unknown, of course, is the amount of margin improvement that Punch has enjoyed by dint of its long-term beer supply agreements that cap the rate of increase it receives from brewers.

We want to hear their case, but we want them to hear our case as well. There's always two sides to every story.​Roger Whiteside

"We have made a judgement on how much of the wholesale price increase we can give up. We think 4% across the board is equitable and fair. We didn't pass on the wholesale price increases that the brewer introduced last September. We think that anything that keeps some prices down at the expense of others creates an uneven playing field and leads to all sorts of distortion.''

Whiteside argues that there isn't a massive price gap between Punch tenants and managed operators. The vast majority of Punch tenants who are given extra support in the way of beer discounts choose to build margin rather than slash prices, he says. This is because these tenants know that lower prices will not drive volume: "Lots of our pubs are targeting the opposite end of the price-sensitive spectrum."

Encouragingly, Whiteside also seems to have a clear vision of how the estate will develop in the future, the key areas of support that the company can give to help tenants grow sales. He talks about creating Wi-Fi areas in pubs, installing plasma screens, organising footfall-building events.

The alignment of interests be-tween pubco and tenant — "we share in the upside and we share in the downside through the wet tie" — is visible in the eight-strong food team helping pubs improve their food offer. He even utters the phrase "category management", pointing out that there are many areas such as coffee, wine and cider that are in growth (and questioning why pubs are bothering with fridge